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Adex Mining Inc. is the Indium Major

by Zig Lambo, contributing writer

Despite the current economic downturn, Adex Mining has managed to advance a project that could see tin, zinc and indium products being shipped from its New Brunswick mine site within a few years. On the basis of information provided in its most recent NI 43-101 report (available on Sedar), it appears that Adex presents a truly undervalued investment opportunity.

Adex Mining Stock Details as of October 28, 2009.

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The current 43-101 compliant North Zone (“NZ”) Mineral Resource estimate includes an Indicated Mineral Resource of 10,882,000 tonnes, plus an Inferred Mineral Resource of 7,603,000 tonnes. Indium, a rare metal with strong demand now that it is has become an essential component used in flat panel screens and solar energy technologies, is a significant resource at Adex’s Mount Pleasant mine property.

Mount Pleasant site.

Indium is chemically similar to aluminum, ranking 61st in abundance in the earth’s crust. It is soft, malleable and easily fusible and occurs with base-metal minerals such as tin, copper, lead and zinc. It is in increasing demand for use in high tech applications such as liquid crystal displays for computers and other electronics, thin-film solar technology, semi-conductors, infrared reflectors and solders. The current metal price is in the range of US$500 to US$550/kg for 99.999% indium.

We spoke with J. Errol Farr, Adex’s President, to gain a better picture of where this project now stands and what could happen here to make for some very happy investors in the coming year.

Mr. Farr told us that Adex is continuing to develop its wholly owned Mount Pleasant Mine property, which is a past producer of tungsten concentrate in southern New Brunswick, Canada. According to Mr. Farr, Adex plans to produce tin, indium, tungsten and molybdenum from its currently outlined mineral resources. The Mount Pleasant minesite is situated approximately 80 kilometres south of Fredericton, the provincial capital, and 65 kilometres from the U.S. border. The Mount Pleasant Mine has been independently identified in a 1996 report by Phillip Wright in “Mineral and Metal Commodity Review” for Natural Resources Canada as the world’s largest undeveloped indium deposit.

Property History

There is a long history of exploration and development at Mount Pleasant dating back to 1937 when tin mineralization was first discovered on the property. Over the years, the focus of exploration has shifted from tin-based deposits between 1954 and 1969 to tungsten-molybdenum deposits between 1969 and 1985, and then back to tin deposits between 1991 and 2004, during which time indium was recognized as an important part of the tin-zinc mineralization.

Billiton Exploration Canada Ltd. invested over $150 million at Mount Pleasant during the early 1980s in the construction of a tungsten mine and mill based on the then defined reserves within the Fire Tower Zone. Some 990,200 tonnes of tungsten ore grading 0.35% were milled at the facility between 1983 and 1985. Unfortunately, a downturn in the price of tungsten caused the mine to close prematurely in 1985.

Adex has owned the Mount Pleasant Mine mineral claims and property rights since 1994. These include 102 contiguous mineral claims which cover approximately 1,600 hectares (4,000 acres), as well as 405 hectares (1,000 acres) of surface rights which include the existing infrastructure of the past-producing Mount Pleasant Tungsten Mine.

The surface facilities, which include ore storage areas, conveyor galleries, concentrator and crusher buildings, warehouse, maintenance shop, administration building and personnel change facilities have been maintained in excellent condition. Electrical power is distributed from a modern sub-station connected to the New Brunswick power grid. Adex believes that this well preserved infrastructure will significantly reduce the overall costs associated with re-activating the mine.

The Current Plan

Adex is concurrently developing processes not only for concentrate production, but also for value added products such as indium metal, zinc metal and ammonium paratungstate. A scoping study to be completed before the end of this year is expected to lead to the preparation of a definitive feasibility study and a production decision.

On June 30, 2009, the Company had net working capital of $2,935,351 and no long term liabilities. The Company currently has the necessary resources to complete the study phase of this development based on current project estimates.

Our Value Calculations

Using our GRR calculators for analyzing Adex, found at http://shareknow.net/companies/2282, we think that Adex Mining certainly appears to be a significantly undervalued investment situation, considering the current price of its stock relative to the value of minerals in the ground and the economics of extracting them. Of course, the value numbers we develop here are for our own use and simply an indicator of relative value compared to other possible investment opportunities which investors can examine on their own. These are not provided or endorsed by Adex management or its consultants and can be substantially higher than those developed and used in actual feasibility studies and operating plans.

With resource figures obtained from the company’s 43-101 reports and the prices of tin, tungsten, moly, zinc, and indium at current levels, and assuming an average recovery rate of 75%, our calculators come up with a gross metals value of over US$2.87 billion in the ground. We assign no value for bismuth, and copper even though they could provide additional revenue but may cost more to extract.

So with the 88.1 million shares currently outstanding we obtain a gross value of recoverable metals in the ground of about US$32.50 per share. With estimated operating costs of US$20 per tonne and capital costs of US$165,000,000 over the life of the total project, we end up with an undiscounted value of just under US$22.50 per share. Of course these numbers can be adjusted all over the map, based upon possible variations in metals prices and costs and which metals are actually produced. Nevertheless, even if the end result comes out to only $5.00 per share, it certainly looks like Adex stock is quite a bargain at its current price of C$0.12 per share.